US government records $904.2B deficit through June

WASHINGTON (AP) -- The U.S. budget deficit grew by nearly $60 billion in June, remaining on track to exceed $1 trillion for the fourth straight year.

Through the first nine months of the budget year, the federal deficit totaled $904.2 billion, the Treasury Department reported Thursday.

President Barack Obama is almost certain to face re-election having run trillion-dollar-plus deficits in each his first four years in office. That would likely benefit his opponent, GOP presumptive nominee Mitt Romney.

Obama and congressional Republicans remain at odds over how to lower the deficit. Unless their disagreement is broken, a series of tax increases and spending cuts could kick in next year. Economists warn that could dramatically slow an already weak U.S. economy and even tip it back into a recession.

The Congressional Budget Office predicts the deficit for the full year, which ends on Sept. 30, will total $1.17 trillion. That would be a slight improvement from the $1.3 trillion deficit recorded in 2011, but still greater than any deficit before Obama took office.

One positive sign this year is the deficit is growing more slowly than last year.

In June it was 6.8 percent behind the pace for the same period in budget year 2011. And a key reason for that is that revenues are up 5.2 percent this year, while spending is down by 0.9 percent.

But the modest improvement has not cooled the budget debate in Washington.

Obama submitted a budget request to Congress in February that sought $4 trillion in deficit reduction over the next decade through a combination of spending cuts and tax hikes.

A key part of his proposal is to allow tax cuts to expire for couples earning more than $250,000. He has called for extending similar cuts for people earning less than that.

Obama would also set a 30 percent tax rate on taxpayers making more than $1 million.

Republicans have rejected the tax increases. They want more cuts in government programs. The GOP-controlled House has approved a budget that calls for deep cuts in Medicare and other programs and a new round of tax cuts that would favor wealthy Americans.

The House-approved spending plan has no chance of passing in the Senate, where Democrats hold a slim majority. That sets the stage for gridlock until after the November elections when lawmakers will be faced with a number of end-of-the-year deadlines.

Romney has proposed broad but largely unspecified spending cuts. He would reduce the federal work force by 10 percent and keep the tax cuts for all incomes, not just families making less than $250,000.

Romney is also wants to drop all tax rates by 20 percent. He would curtail deductions, credits and exemptions for the wealthiest to pay for the lower rates, but he does not specify what tax breaks would be trimmed.

Tax cuts approved during President George W. Bush's administration are scheduled to expire at the end of December. In addition, a set of automatic spending cuts totaling about $1.2 trillion over 10 years are scheduled to kick in. Both parties oppose the automatic spending reductions because they include deep cuts in defense.

However, they have been unable to reach an agreement so far on alternate spending cuts or tax increases that would keep the automatic cuts from taking effect.

The International Monetary Fund warned that the U.S. economy could suffer another recession if Congress doesn't do something to avert the so-called "fiscal cliff." The impact could shave 4 percentage points off U.S. growth, the IMF said.